Exam 9: Possibilities, Preferences, and Choices

A household's consumption choices cannot exceed limits created by

-Consider the change in the price of a book depicted in the above figure. The original budget line is BC. The new budget line is BD. As a result of this price change, the substitution effect can be represented by a movement from

Suppose a budget line is drawn between pizza, on the horizontal axis, and tacos, on the vertical axis. How does a change in the price of a pizza affect the budget line?

As Sam moves rightward along his indifference curve, his marginal rate of substitution

-In the above figure, income is $8, the price of a soft drink is $1, and the initial price of a milkshake is $2. If the price of a milkshake decreases to $1, the substitution effect is the movement from point ________ to point ________.

The marginal rate of substitution is ________, the ________ is the ________.

-Lizzie's budget line is shown in the figure above. Lizzie's real income in terms of magazines is ________ magazines

Which two goods will most likely have indifference curves that are straight lines?

-In the table above, in terms of units of pizza, real income is

In order for you to consider steak and lobster to be perfect substitutes, their prices per pound must be identical.

-Lizzie's budget line is shown in the figure above. If the price of a magazine rises, Lizzie's real income in terms of magazines books ________ and her real income in terms of cookies ________.

Suppose you are graphing the quantity of bagels on the vertical axis and the quantity of coffee on the horizontal axis. A household's real income in terms of bagels is the

-The figure above shows Ilene's budget line. The price of a can of cat food is $2. Ilene's income per week is

-The figure above shows Sam's budget line. Sam's budget line shows

-The figure above shows Sam's budget line. Which of the following would result in Sam's budget line shifting leftward and not changing its slope?

On a big weekend of college football in 2010, The Associated Press found fans… who said they are making concessions yet determined to indulge their passion. "We basically let the wife and children not eat for a week so we can do this," joked Neil Plotkin, who was attending his first Penn State game. If Neil's marginal rate of substitution between weeks of food and his first Penn State game is 1, what do you predict the marginal rate of substitution between food and subsequent Penn State games is for Neil?

Except for perfect complements, an indifference curve has a ________ slope and becomes ________ moving to the right.

Moving along a given budget line,

A recent article by the Associated Press examined the effect higher gas prices have on the consumption of other goods. It said that the increase in the price of gasoline has decreased the quantity of other goods, such as food, that people consume. (Source: Associated Press, September 28, 2012) -If the price of gasoline increases and the price of food remains the same, then real income measured in terms of

Organic food might be good for your health but in light of the 2008 downturn in the economy and falling incomes, consumers are buying less organic and more non-organic food. Based on these events, what is true?